Opel Declares War On GM

Check out this take on troubles brewing at General Motors' German Opel unit, from our European economic correspondent, Stefan Theil. Is this the beginning of a new union stand in Germany?

The Germans upped the pressure on General Motors today, trying to force the automaker to agree to a plan brokered by German chancellor Angela Merkel that would spin off GM's struggling German Opel unit to a Russian-Canadian consortium. If it doesn't sell, GM will face "civil restistance" at its German plants, the head of Germany's powerful industrial union IG Metall, Berthold Huber, warned today. As a warning shot, union officials representing Opel's 25,000 German workers have withdrawn an earlier agreement to slash vacation bonuses, which could hit GM with a big bill for back pay next month. This weekend, Opel workers will demonstrate in front of the U.S. embassy in Berlin. The barrage came after leaked reports that GM was exploring other options, including holding on to Opel.

On the surface, the battle is over how to save Opel, kept precariously afloat by a $2 billion subsidy from German taxpayers. For years, the Germans have blamed Detroit for allegedly mismanaging Opel, whose dowdy, down-market cars have long been the least regarded brand in the land of sleek Audis, Mercs, and Beemers. There's even a German children's rhyme, "Jeder Popel fährt 'nen Opel," that roughly translates as "every snothead drives an Opel." All but unanimously, German politicians and commentators have jumped at the chance to rid Opel of its unloved American masters. Under the German plan, 55 percent of Opel would be split between the Russians and Canadians for a total of 700 million dollars, 35 percent would stay with GM, and 10 percent would go to Opel's workers. The workers' shares would not be directly held by employees but be parked in a separate entity controlled and supervised by union functionaries.

This, of course, is the real agenda behind IG Metall's ever-shriller threats. Not only would the union get a slice of a company whose assets – factories, R&D, dealers' networks - are still estimated by analysts to be worth some 20 billion dollars. Much more importantly, however, Opel would set a huge precedent for IG Metall's plans for a revolution in German corporate governance, giving workers majority control of potentially all major German companies. That's because German corporate law already requires all companies that employ more than 2000 workers to give 50 percent of the voting seats on corporate supervisory boards (which appoint managers, supervise finances and approve strategic decisions) to workers' representatives. Shareholders – i.e. the company's owners - have a tie-breaking vote. A 10 percent block of Opel shares controlled by the union would thus add further union votes on the shareholder side, giving workers control of the company. IG Metall's Huber has lately tried to push this model on other companies squeezed by the economic crisis, hoping they will be trade shares – and thus control – for pay freezes and other union concessions.

As German politicians and commentators keep busy bashing GM and Washington for not giving in to Berlin's demands, and as Germany's largely apolitical business community stays out of the fray for fear of influencing the final leg of Germany's election campaign, it looks like the very future of Germany's economic system will in no small part be decided over the next few weeks in Detroit.